Where now?
Since 9/11, just about every big cap hi tech has set new multi-year lows. Now QCOM has joined them. The next step is either:
1. drift around at about these levels, set a low a bit lower, and then form a horizontal range for months, or
2. quickly plunge to much lower lows.
I'm guessing it's option 1. Reasons:
1. the stock peaked almost 2 years ago, and has sold off many times. Sentiment on the market and sector is bleak. I think we are getting to the point where the weak hands are out.
2. the news which caused this new low is not material. It makes no change in 12Month forward expected EPS. More times than I can count, I've seen this stock make big moves (in both directions) on essentially trivial news, and then retrace once people think about it. IMO, the same will happen now.
3. It took a long time to take out the July 2000 low, and, by the time we did, most of the decline was over. That is, the new low (43 in April 2001) wasn't that much lower than the previous low (52 in July 2000). There is no panic selling going on now, no capitulation. At worst, we'll get a slow grind down, bottoming sometime in the next few months, somewhere in the mid-30s. I see no huge gapdowns, no plunge into the 20s. Most of the decline is over for this stock. From mid-February through 9/11/01, we were in a 50-65 range. I expect another horizontal channel to form, with 45 or 50 as the top, and 30 or 35 as the bottom.
4. wireless is, IMO, going to weather the upcoming recession better than just about any other sector. IMO, people will continue buying cellphones, while cutting back on other purchases. So, I don't expect QCOM to be doing the kind of warnings that we've seen other techs doing
My plan: I recently bought at 50 and 45, and have a pending order (same $ amount) at 40, which I'll probably get soon. At that point, with 3 buy-points reached, I will have as much as I can buy. Then, on rallies, I will sell my highest-cost lot at 50 (or wherever the top of the range looks to be forming). I will hold onto my 2 lowest-cost lots, and add when new lows are set, if I have the cash to do so. |
